> That's it folks. The market has been cornered by a couple guys and it seems the regulatory barriers have been lifted high enough that nobody can enter again. Remember when MasterCard/Visa used to send these cards for free without any KYC whatsoever?
It’s a fundamentally hard market for anyone else to enter because Mastercard and Visa basically have natural monopolies.
The value that both Mastercard and Visa bring to the table is:
1) if you’re a bank, most merchants accept their cards
2) if you’re a merchant, most banks provide a card from one of them.
So any new network has the classic chicken and egg problem. How do you convince merchants to accept your card (and potentially additional payment processing terminals) when none of the merchants customers have the card. And in the inverse, how you get a bank to invest in integrating with your network, when no merchants accept your card?
The EU tried to force a fox on this issue by creating EuroPay. Which ultimately failed and was bought by… Mastercard. But on the upside, part of the purchase deal require that Mastercard provide “at-cost” access to its network for a new card network to piggy back off, to help solve the above chicken and egg problem. But atlas’s, even that doesn’t reduce the barrier to entry enough, especially when coupled with the EU rules capping maximum interchange fees.
> How do you convince merchants to accept your card (and potentially additional payment processing terminals) when none of the merchants customers have the card.
Well, at least at the national scale, it can and is done. You start with terminal providers or select the niche that doesn't use them at all (online payments). Then you need top 5 banks to support your new method in their mobile apps/transaction systems. All is left is massive advertising campaign, and if it is successful, other banks will join. https://en.wikipedia.org/wiki/Mobile_payment contains a huge list of attempts that worked out (or not).
It is going international where things get very tricky. Even Paypal and Stripe had to be based on Visa/MC, there are no other worldwide options than credit cards. It is a bit better if you want to only cover EU(thanks to PSD2 banks had to provide APIs), but that is all. Google's and Apple's payment systems could become independent from Visa/MC but people just don't want to top up some weird accounts when they can just "connect" a card instead.
> How do you convince merchants to accept your card (and potentially additional payment processing terminals) when none of the merchants customers have the card. And in the inverse, how you get a bank to invest in integrating with your network, when no merchants accept your card?
In Russia banks and merchants were convinced to use the national payment system basically overnight.
In India, RuPay (Rupee+Pay not Russia+Pay) was essentially adopted through a combination of incentives and penalities. Though not overnight, they did manage to get a sizable share of the domestic market in a few years
It’s a fundamentally hard market for anyone else to enter because Mastercard and Visa basically have natural monopolies.
The value that both Mastercard and Visa bring to the table is:
1) if you’re a bank, most merchants accept their cards
2) if you’re a merchant, most banks provide a card from one of them.
So any new network has the classic chicken and egg problem. How do you convince merchants to accept your card (and potentially additional payment processing terminals) when none of the merchants customers have the card. And in the inverse, how you get a bank to invest in integrating with your network, when no merchants accept your card?
The EU tried to force a fox on this issue by creating EuroPay. Which ultimately failed and was bought by… Mastercard. But on the upside, part of the purchase deal require that Mastercard provide “at-cost” access to its network for a new card network to piggy back off, to help solve the above chicken and egg problem. But atlas’s, even that doesn’t reduce the barrier to entry enough, especially when coupled with the EU rules capping maximum interchange fees.